Italy's biggest lender said the European Central Bank had notified it that it was allowed to consolidate its remaining 20% stake in Yapi in its balance sheet using the equity method.

This is an accounting method companies can use to book their holding in another firm when they do not exercise full control over it, allowing them to book as an investment a proportional share of the equity of that firm.

The bank will also apply the deduction mechanism for significant investments in financial sector entities.

"Following such notification, the group's risk weighted assets will no longer include YKB's proportional contribution," UniCredit said in a statement on Wednesday.

UniCredit will also exclude Yapi when calculating its liquidity ratios.

The unwinding of UniCredit's joint venture with Turkish conglomerate Koc Holding and the sale of part of its stake in the country's third-biggest bank are part of a broader strategy to streamline its assets.

(Reporting by Valentina Za; editing by Giulia Segreti and Jason Neely)